Case Study Description of Best Buy's Turn-Around Strategy (2013)
CEO Hubert Joly must devise a turn-around strategy that will enable Best Buy to survive in an increasingly competitive consumer electronics market. By year-end 2012, Best Buy's stock price had dropped roughly 60% over a two-year period and same store sales and overall profitability were showing a consistent, negative trend. On the plus side, revenues were increasing (at a marginal rate), while Best Buy continued to dominate its competitors in terms of sales volume and U.S. market share. In addition, Best Buy's online business was growing by 15% to 20% each quarter. Still, critics were doubtful that Joly could save the company, which seemed intent on following Circuit City down the fast-track to bankruptcy.
Authors :: Marne L. Arthaud-Day, Frank T. Rothaermel
Swot Analysis of "Best Buy's Turn-Around Strategy (2013)" written by Marne L. Arthaud-Day, Frank T. Rothaermel includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Buy's Joly facing as an external strategic factors. Some of the topics covered in Best Buy's Turn-Around Strategy (2013) case study are - Strategic Management Strategies, Corporate governance, Crisis management, Leadership and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Best Buy's Turn-Around Strategy (2013) casestudy better are - – increasing household debt because of falling income levels, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , wage bills are increasing,
increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Best Buy's Turn-Around Strategy (2013)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Best Buy's Turn-Around Strategy (2013) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Buy's Joly, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Buy's Joly operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Best Buy's Turn-Around Strategy (2013) can be done for the following purposes –
1. Strategic planning using facts provided in Best Buy's Turn-Around Strategy (2013) case study
2. Improving business portfolio management of Buy's Joly
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Buy's Joly
Strengths Best Buy's Turn-Around Strategy (2013) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Buy's Joly in Best Buy's Turn-Around Strategy (2013) Harvard Business Review case study are -
Analytics focus
– Buy's Joly is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Marne L. Arthaud-Day, Frank T. Rothaermel can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High brand equity
– Buy's Joly has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Buy's Joly to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Buy's Joly
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Buy's Joly does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Buy's Joly in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Buy's Joly has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Strategy & Execution field
– Buy's Joly is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Buy's Joly in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Buy's Joly is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Buy's Joly has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Buy's Joly has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– Buy's Joly has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Best Buy's Turn-Around Strategy (2013) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Buy's Joly digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Buy's Joly has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Diverse revenue streams
– Buy's Joly is present in almost all the verticals within the industry. This has provided firm in Best Buy's Turn-Around Strategy (2013) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy in the Best Buy's Turn-Around Strategy (2013) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses Best Buy's Turn-Around Strategy (2013) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Best Buy's Turn-Around Strategy (2013) are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Best Buy's Turn-Around Strategy (2013), it seems that the employees of Buy's Joly don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Capital Spending Reduction
– Even during the low interest decade, Buy's Joly has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Buy's Joly supply chain. Even after few cautionary changes mentioned in the HBR case study - Best Buy's Turn-Around Strategy (2013), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Buy's Joly vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Marne L. Arthaud-Day, Frank T. Rothaermel suggests that, Buy's Joly is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Skills based hiring
– The stress on hiring functional specialists at Buy's Joly has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Best Buy's Turn-Around Strategy (2013), in the dynamic environment Buy's Joly has struggled to respond to the nimble upstart competition. Buy's Joly has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– After analyzing the HBR case study Best Buy's Turn-Around Strategy (2013), it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, Buy's Joly has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Buy's Joly even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– It come across in the case study Best Buy's Turn-Around Strategy (2013) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Best Buy's Turn-Around Strategy (2013) can leverage the sales team experience to cultivate customer relationships as Buy's Joly is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Best Buy's Turn-Around Strategy (2013) HBR case study mentions - Buy's Joly takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Best Buy's Turn-Around Strategy (2013), is just above the industry average. Buy's Joly needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Opportunities Best Buy's Turn-Around Strategy (2013) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Best Buy's Turn-Around Strategy (2013) are -
Better consumer reach
– The expansion of the 5G network will help Buy's Joly to increase its market reach. Buy's Joly will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Loyalty marketing
– Buy's Joly has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Buy's Joly can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Buy's Joly can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Buy's Joly can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Buy's Joly can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Buy's Joly can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Buy's Joly has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Best Buy's Turn-Around Strategy (2013) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Buy's Joly to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Buy's Joly in the consumer business. Now Buy's Joly can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Buy's Joly can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Best Buy's Turn-Around Strategy (2013) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Buy's Joly in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Buy's Joly to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Leveraging digital technologies
– Buy's Joly can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Buy's Joly to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Buy's Joly to hire the very best people irrespective of their geographical location.
Threats Best Buy's Turn-Around Strategy (2013) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Best Buy's Turn-Around Strategy (2013) are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Buy's Joly in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing wage structure of Buy's Joly
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Buy's Joly.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Buy's Joly needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Buy's Joly is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Buy's Joly with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Buy's Joly has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Buy's Joly needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Best Buy's Turn-Around Strategy (2013), Buy's Joly may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Buy's Joly will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Consumer confidence and its impact on Buy's Joly demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Buy's Joly can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Buy's Joly business can come under increasing regulations regarding data privacy, data security, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Buy's Joly.
Weighted SWOT Analysis of Best Buy's Turn-Around Strategy (2013) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Best Buy's Turn-Around Strategy (2013) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Best Buy's Turn-Around Strategy (2013) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Best Buy's Turn-Around Strategy (2013) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Best Buy's Turn-Around Strategy (2013) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Buy's Joly needs to make to build a sustainable competitive advantage.
